The practice of enlisting the help of brokers to fill vacant apartments isn't unique to New York City. In many parts of the country, brokers fill an essential role -- vetting tenants for landlords and handling showings and paperwork to match renters with available homes.
But what makes New York City's setup so unique is that the burden of paying a broker generally falls on tenants, whereas in much of the country, landlords are the ones who absorb those fees. And while those navigating New York City's rental market may be familiar with this arrangement, it doesn't mean they're happy about it.
During the pandemic, many brokers offered discounted fees when the demand for New York City rentals plunged. And many landlords stepped up to cover those fees in an effort to attract tenants and get leases signed.
But these days, there's more demand for New York City apartments. Now that the city has opened back up and more companies are putting an end to remote work, brokers are busy once again. And they're also back to charging a premium for their services.
Could high broker fees hurt New York City landlords?
It's not just that New York City brokers are charging their normal fees; many are commanding even higher ones than they were before the pandemic. And it's tenants who are being forced to foot the bill.
These days, landlords are less apt to cover the cost of broker fees, partially because the demand for rentals is back up, but also, because landlords themselves are still in the process of recovering from the blow the pandemic dealt them. Many landlords lost rental revenue in 2020 as apartments sat empty, so now they're operating in catch-up mode.
But tenants may be less than thrilled with the idea of once again having to pay hefty broker fees, and if enough pushback ensues, landlords may be forced to change their strategy. That could mean covering broker fees or splitting the cost with tenants as a compromise.
Compounding the issue is the fact that brokers can now earn a fee without doing the same legwork they once had to. Early on in the pandemic, a state restriction that forced brokers to physically show available homes to tenants was lifted. At the time, that made sense. But now, brokers are in a position where they can collect their fees even if they never meet their clients -- i.e., prospective tenants -- in person.
This isn't to say that brokers who don't meet tenants for in-person showings do nothing to earn their fees. There's still a lot of administrative work brokers are required to handle. But from a tenant perspective, the optics aren't great.
Will the practice of having tenants pay for brokers continue?
Some advocates argue that the whole practice of forcing New York City tenants to pay broker fees is unjust. But defenders of that practice argue that if landlords were forced to cover those fees themselves, tenants would end up paying them one way or another -- if not upfront, then in the form of higher rent.
It'll be interesting to see if hefty broker fees have a negative impact on landlords as more renters flock back to New York City. It'll also be interesting to see how the practice evolves as the rules around broker responsibilities change in light of the pandemic.